November 12, 2018 / 10:43 AM / a month ago

Germany opens door to deal on EU digital tax at December meeting

BERLIN (Reuters) - German Finance Minister Olaf Scholz said he favours getting a binding deal on a European Union digital tax at a meeting of EU finance ministers in December, and that he supports the French model for the move.

FILE PHOTO: German Finance Minister Olaf Scholz attends a meeting in Berlin, Germany October 16, 2018. REUTERS/Michele Tantussi/File Photo

France has long been the main supporter of the tax, but has grown increasingly frustrated with German hesitation over the details after Berlin agreed in principle to the idea in June.

“If the negotiations continue the way that they have been going, we’ll still be in talks in 100 years. That is why I support the French model and want to offer the proceeds to the EU,” news weekly Der Spiegel quoted Scholz on Monday as saying.

After months of tough lobbying, the French government has said that only Denmark, Sweden and Ireland remain opposed.

Germany, meanwhile, had until now been wavering over the proposed EU plan to tax big internet firms such as Google and Facebook on their turnover, which EU officials say unfairly pay less tax than other companies.

Germany called earlier this month for a revision of the plan that would exclude from the proposed tax activities linked to carmakers, which Paris has assured would not be covered.

In a significant concession, French Finance Minister Bruno Le Maire agreed last week to delay the implementation of the tax until the end of 2020 and only if a global deal is not reached on the issue beforehand.

Le Maire said on Friday that Germany’s failure to back the proposed tax at a Dec. 4 EU finance ministers meeting would trigger a breakdown of trust between the two countries.

MACRON’S STAKE

French President Emmanuel Macron has staked considerable political capital on the tax, part of his broader vision for closer euro zone integration. The digital levy is also seen in Paris as a useful example of joint European action before EU parliamentary elections next year.

Under a proposal from the EU’s executive Commission in March, EU states would charge a 3 percent levy on the digital revenues of large firms that are accused of averting tax by routing their profits to the bloc’s low-tax states.

The plan is aimed at changing tax rules that have let some of the world’s biggest companies pay unusually low rates of corporate tax on their earnings.

But it requires the support of all 28 EU states and is opposed by a number of them, including small, low-tax countries like Ireland that have benefited by allowing multinationals to book profits there on digital sales to customers elsewhere.

The French government and European Commission have said big internet companies like Google and Facebook are not paying their fair share under existing tax rules, to which companies respond that they are fully in line with the rules.

European Commission President Jean-Claude Juncker said a digital levy was essential, telling a business conference in Berlin: “We need a digital tax - there is no way around it.”

Cooperation on taxes at the EU level exists in some areas, such as regulation on VAT, though setting taxes in principle remains the business of member states.

Scholz, the German finance minister, also said the EU should push ahead with minimum corporate tax rates and effective taxation of digital companies from January 2021 if states fail to reach an international agreement on tax avoidance.

“We are in principle in agreement with our French friends on such a two-step strategy,” he said.

Additional reporting by Tassilo Hummel in Berlin and Leigh Thomas in Paris; Editing by Mark Heinrich

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